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New Zealand: Income tax treaty with China

New Zealand: Income tax treaty with China

Earlier this year, representatives of the governments of New Zealand and the People’s Republic of China signed a new income tax treaty.


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New Zealand on 30 September 2019 completed its domestic procedures to give effect to the new income tax treaty with China. The income tax treaty will enter into force once China has also completed its domestic procedures. Once in force, the treaty will replace and modernise the existing treaty, which was signed in 1986. 

Some key highlights of the new income tax treaty [PDF 274 KB] include the following:

Withholding rates

  • A 5% withholding rate will apply for dividends paid to a company shareholder holding at least 25% of the company paying the dividend. A 15% withholding rate will apply in other cases.
  • A 0% withholding rate will apply for dividends paid to either government, or to specified governmental entities, for shareholdings of 25% or less in the company paying the dividends. A 0% withholding rate will also apply for interest paid to certain government-owned entities.

Permanent establishment  

  • The permanent establishment (PE) article has been expanded to include the changes in Article 12 of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (the “MLI”). The new PE article targets the avoidance of a PE through commissionaire or similar types of arrangements. This means that a New Zealand PE will prima facie arise for a company resident in China when a closely related party habitually plays the principal role leading to the conclusion of contracts on behalf of the Chinese entity.


  • Unlike many of New Zealand’s recent income tax treaties, the new royalties article in the treaty with China applies to equipment leasing. Such lease payments will continue to be taxed as royalties rather than being taxed under the business profits article. (If treated as business profits, such payments would only be taxable if the non-resident has a PE in New Zealand or China.) 

Effect of the MLI

While both countries have signed the MLI, China has not yet ratified it. Further, many of the MLI articles would not apply to the existing income tax treaty given differences in New Zealand and China’s positions. However, the new income tax treaty incorporates some of the MLI provisions, such as Article 12 (PE), Article 3 (relating to fiscally transparent entities) and Article 4 (which provides for mutual agreement by tax authorities to determine which jurisdiction an entity is resident in the case of dual residence). 

A number of New Zealand’s income tax treaties have been (or will soon be) updated for various MLI provisions. Which MLI articles apply will depend on the choices made by New Zealand and the partner country.

A selection of “updated” income tax treaties to which New Zealand is a treaty partner and their application dates is reflected in this table. 

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Read an October 2019 report prepared by the KPMG member firm in New Zealand

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